Going Green Pays Off
Claim an energy tax credit for the home improvements you made last year.
If you made energy-efficient home improvements last year, such as installing insulation or replacing exterior doors and windows in your primary residence, you probably smiled all winter long as brutal storms battered much of the country. But now you get an added bonus: You can share the cost of those upgrades with Uncle Sam when you file your 2010 tax return.
The home energy credit allows you to claim a tax credit equal to 30% of the cost of making energy-efficient home improvements, up to a maximum of $1,500. So if you spent at least $5,000 in 2010, you can get the full value of the credit. (A tax credit, which reduces the amount of tax you owe, is more valuable than a tax deduction, which merely reduces the amount of income subject to tax.) The $1,500 maximum credit is a lifetime amount that applies to 2009 and 2010 combined. So if you claimed a $1,000 residential energy tax credit on your 2009 return, and you made additional home improvements last year, you can claim a credit of only $500 when you file your 2010 tax return. If you claimed the full $1,500 credit on your 2009 return, you are not eligible for the tax credit in 2010.
In addition to windows, doors, skylights and insulation, the home energy credit also applies to super-efficient central air-conditioning units, heat pumps, furnaces and water heaters. And you don’t have to itemize to claim the credit.. Just fill out Form 5695. Anyone can claim it, regardless of income.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Even taxpayers subject to the alternative minimum tax (AMT), an alternative tax system that disallows many deductions and credits, can claim the home energy tax credit on their 2010 returns. And if you didn’t get around to a home-improvement project last year, you still have time to cash in on a smaller credit in 2011. It’s worth 10% of the cost of your project, up to $500 (and only $200 can be allocated to windows and skylights). The $500 amount must be reduced by any previous home energy credits that were available in 2006, 2007, 2009 and 2010.
Alternative energy
Homeowners who installed renewable-energy devices qualify for an even bigger tax break: 30% of the cost, with no maximum. (The previous $2,000 cap on the tax credit has been repealed.) Qualifying improvements include geothermal heat pumps, solar-powered water heaters, solar panels, fuel cells and small wind-energy systems (see www.energytaxincentives.org for details). The equipment can be installed in new or existing homes.
To claim the credit on your 2010 tax return, you must have installed the equipment by December 31, 2010. But if you didn’t, there’s still plenty of time to cash in on this tax break, which is available through 2016. To qualify for the credit, no part of the system can be used to heat a swimming pool or hot tub.
If you installed both energy-efficient improvements and a renewable-energy device last year, you can claim both tax credits on your 2010 return.
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
-
Are You Middle-Class? Here's the Most Tax-Friendly State for Your FamilyTax Tips We found the state with no income tax, low property tax bills and exemptions on groceries and medicine.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
How Are I Bonds Taxed? 8 Common Situations to KnowBonds Series I U.S. savings bonds are a popular investment, but the federal income tax consequences are anything but straightforward.
-
Capital Gains Tax Quiz: How Well Do You Really Know IRS Investment Tax Rules?Quiz Take our capital gains tax quiz to test your investment taxes knowledge. Learn about loss rules, holding periods, and tax incentives that could impact your savings.
-
6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)Retirement Taxes Here’s how converting your traditional retirement account to a Roth IRA can boost your nest egg — but avoid these costly scenarios.
-
Could Tax Savings Make a 50-Year Mortgage Worth It?Buying a Home The 50-year mortgage proposal by Trump aims to address the housing affordability crisis with lower monthly mortgage payments. But what does that mean for your taxes?
